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O'Charley's Gets Chucked

The steakhouse seems to have lost its sizzle.

Joining the likes of Darden Restaurants(NYSE:DRI), Panera Bread(NASDAQ:PNRA), and Ruby Tuesday(NYSE:RT) at the bar to drown its sorrows, O'Charley's(NASDAQ:CHUX) spun quite the sad tale late last week. Several one-time charges for the company's rebranding campaign, and supply chain and management changes, sank net income by 86%. Of course, one-time charges are just that, and income should be expected to rebound.

The kicker? Even after excluding those charges, the company only earned $0.12 per share, compared to analysts' expected $0.20 and the $0.22 the company earned in last year's quarter.

It's difficult to find a real bright side to this story. O'Charley's is trying to pursue what should be a more recession-resistant higher-income crowd, though the crowds are obviously elsewhere; guest counts fell 8% in the latest quarter. Traffic has dropped at similar rates over the past year, as O'Charley's phased out its "kids eat free" promotion.

All three of the company's restaurant concepts suffered lower same-store sales, falling 4.3% at O'Charley's, 2.6% at Ninety Nine Restaurants, and even 4.5% at the high-end Stoney River Legendary Steaks. Poor O'Charley just can't get a break, can he?

While the company blames unfavorable weather and a calendar shift that affected New Year's Eve sales, I'm hesitant to bite into the excuses they're serving. For one, O'Charley's ongoing rebranding campaign tells me that the company took a wrong turn somewhere.

Therein lies the rub: Most of the stocks I've mentioned here are lacking the edge they need to be great investments. Other than maybe a personal favorite menu item, none of these restaurants seem to offer a distinctive feature that brings back patrons time after time.

As it stands, all three are reworking their business models to some extent. The hungry diner in me looks forward to some creative new options at these places, but the conservative investor in me will wait to see how this all plays out.